Before you say yes to a store credit card

By Geoff Williams, CardRatings contributor

Updated, April 13, 2015

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You've clipped your coupons. Scanned the ads. Cleaned out the trunk of your car. You're ready to shop for your family, your friends, your co-workers and the aunt you see only once a year, but are you ready for the question you'll invariably be asked every time you whip out your wallet?

"Do you have a store credit card?" Followed by: "Would you like one?"

You can be asked if you want a store credit card year round, but around Christmas time, just by the sheer number of customers out en masse, it seems logical to presume that you might be asked about this particular piece of plastic more during this time of year than any other. So with that in mind, here are three questions you should ask yourself before signing up for a store credit card.

1. Why am I signing up?

If you frequent the store so much that cashiers recognize you on sight, and you don't have many other store credit cards, you may have a pretty good answer: You're signing up because you love the store and you assume you'll be shopping there enough to collect on the rewards and deals the store is offering. But if your response is, I'm getting 10 percent off the merchandise I'm buying, and I have no particular love for this store, but, hey, 10 percent is 10 percent, then you should think about this for a long moment.

If you're purchasing a $3,000 plasma TV set, 10 percent off is $300, and that's not a bad reason to sign up for the store credit. But most people aren't going that route. If you're spending $74 for a couple of Wii games and a packet of tube socks, however, you're only saving $7.40, in which case you'd better take stock of some more questions.

2. Do I mind my credit score taking a hit?

If you do have a lot of store credit cards, and your credit score is shaky, then you can safely assume that once you sign up for this store credit card, your score will take a modest hit, perhaps 25 points. Which could easily--later, if you're currently looking for a good deal on a car loan, for instance--destroy any value you get from that 10 percent off your shopping trip, even if you bought a $3,000 plasma TV set. So proceed with caution.

But if you don't think you're going to be in the market for a large loan for another six months to a year, then as long as you continue to have good spending habits, the credit score hit is likely to be small. And if you have a strong, lengthy credit history (or almost no credit history), your credit score could actually go up a little by adding a store card to your wallet.

3. Do I mind paying high interest rates?

If you're one of those fortunate people who have no problems making your monthly payments in full, and the concept of revolving debt is completely foreign to you, then this question is moot. But if you do occasionally carry high interest rates, you should recognize that most store credit cards are higher than most non-store cards.

Credit cards issued by banks like the ones from Capital One, Discover, American Express and so on often have 0% APR introductory rates and then have APRs that are more commonly in the teens, though, yes, they range from quite low to ridiculously high.

But APRs on store credit cards generally hover in the mid-20s. For instance:

Target: 22.90% APR

Macy's: 24.50%

Gap: 24.99%

Sears: 25.24%

J.C. Penney: 26.99%

The bottom line

If you often have a tough time making ends meet, and you frequently carry a balance on your other credit cards, then, really, it makes very little sense to get a store credit card, or any new credit card, especially on an impulse purchase.

Especially considering that if December's the season to shop till you drop, January could be the season of realizing you've overspent. You might as well think of a store credit card as extending the shopping season well into next spring.

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